UK DIY News

Terry Duddy, boss of Home Retail Group, which owns Argos and Homebase, has called for the government to do more get people on lower and middle incomes spending again.

His plea came after the company's latest trading statement showed Argos being hammered by the slump on the high street, with sales of televisions, video games and iPods down by as much as 20%.

Duddy said: "The export-led recovery isn't happening. Tax breaks for those on modest earnings and a cut in value added tax would help at a time when surveys show confidence in July was a bad as it was at the height of the credit crunch in January 2009."

Argos reported like-for-like sales down 8.6% in the 13 weeks to 27 August, similar to numbers disclosed by Dixons on Wednesday. The latest data illustrates how hard-pressed households are cutting back on discretionary spending.

Homebase fared better, with sales down just 3.1%. Duddy said fitted bedroom furniture and bathrooms were doing well.

He added: "Overall, the performance in the second quarter was in line with our expectations. Argos sales continued to be hit by the decline in the consumer electronics market, while at Homebase, despite a good first quarter, the second quarter was more challenging."

Margins came under pressure at Argos after it held a big sale during the summer to clear stock.

Although the group is clearly struggling during the slowdown, shares rose 2% to 117p because the figures were not as bad as some feared.

Duddy said he had "a bit of optimism" that consumer electricals would pick up in the second half, pointing to Argos extending distribution of Apple's iPad 2, and the 3D TV packages now being sold for around £700. He also highlighted progress in store refurbishments and plans to expand into TV shopping, books and childrenswear.

Some 20 Argos stores were damaged by the riots last month, but Duddy said the financial impact was "negligible".

UK consumers' purchasing power is being squeezed by higher prices, muted wage growth, a lack of credit, job insecurity, a stagnant housing market and the government's austerity measures.

Home Retail, which is facing intense competition from supermarkets, specialists and internet players, has been particularly hard hit as its predominantly low-income customers are suffering the most severe squeeze on their budgets.Last week a survey said confidence among British consumers fell to its lowest level in four months in August, while on Tuesday an industry report said British retail sales fell last month as shoppers bought fewer non-essential items.